The crypto market, deprived of fresh economic data due to the prolonged US government shutdown, will finally get an important data point on Friday with the release of the September Consumer Price Index (CPI).
Inflation figure could trigger big swings in Ether price compared to bitcoin A store-of-value asset. However, overall, expected market volatility is nothing out of the ordinary.
Inflation increased in September
The consumer price index for September, due to be released at 12:30 UTC, shows the cost of living is expected to rise 3.1% from a year earlier, up from 2.9% in August and the most in 18 months, according to a survey of economists by data provider FactSet. On a monthly basis, inflation is likely to rise 0.4%, in line with August’s pace.
Core inflation, which excludes volatile food and energy categories, is projected to rise 3.1% for the third consecutive month, with a monthly gain of 0.3%.
The consensus is that the data, whether better than expectations or below expectations, is unlikely to prevent the Fed from making another quarter-point cut in its benchmark interest rate next week.
According to analysts at ING, the warmer-than-expected print could bode well for the dollar. A strong dollar index could halt gains in the crypto market.
“We don’t think US CPI will offer that opportunity as we unanimously expect a 0.3% MoM core print. But certainly with a 50bp reduction in absolute value by the end of the year, any hot print could provide good support to the dollar,” ING analysts said in a note on Thursday.
Meanwhile, according to digital asset trading firm Zerocap, a lower CPI could trigger risk-off reaction in the markets.
“The US government shutdown has often starved keen market analysts of important data, and a drip feed of macro signals in the wake of the crypto pullback two weeks ago means lower CPI readings could easily fuel bullish sentiment amid the ongoing retail selloff,” John Toro, head of trading at ZeroCap, said in an email.
Ether will swing 2.9%
Ether, the second-largest token by market cap, could surge 2.9%, surpassing Bitcoin’s volatility following the CPI release, according to Deribit-listed options market data.
“The options market is currently pricing in a move of +1.4% for Bitcoin following today’s CPI release, while Ethereum is pricing in a larger move of +2.9% following today’s CPI release,” Marcus Thielen, founder of 10x Research, told CoinDesk.
Volmex Finance’s one-day implied volatility indices for Bitcoin and Ether indicate similar expected price movements following the CPI release.
The one-day implied volatility indices for XRP and Solana are currently at 91% and 76% respectively, meaning there will be expected price moves of approximately 4.7% for
Severe instability?
Importantly, these projected moves are nothing out of the ordinary. They reflect volatility in either direction and do not indicate a bullish or bearish market outlook.
That said, Thielen’s analysis of leading indicators like stochastics suggests a potential price surge in BTC.
“The Daily Stochastic indicator is showing signs of bullish divergence, even though it has not yet reached its usual 15% lower boundary. This suggests that the pace of the decline may be slowing down, potentially paving the way for a short-term correction in Bitcoin prices,” Thielen said.